It definitely a very individualized choice... even depending on the agency or studio being considered. In my case, freelance is the best way to go mostly because of location and the fact that I'm only designing part time.

Personally I think the best option is a small independent studio with collective of your friends (from school for example) with the same attitude to graphic design. You know each other and you can rely on them..

I think this one of the most difficult questions in the world. Obviously there isn't an obviously answer as both have pros and cons, unless you're a decisive person (which I don't think as you made this question).
I suggest you to try both ways and then decide where to go. Books, friend's talkings and all that stuff may be good, but for me the best way to "know" how is something is to practice it.

I all depends on what kind of work you are commissioning. If you can give more details i believe i can provide a better answer. But as a rule if you take a one page leaflet to a big agency the odds that you will end up with a decent and creative work within a decent budget is pretty low. Freelancers do create amazing works, even big agencies take some of their special projects to specialized freelancers. If you are not working for Honda or at least for a company in top 1000 avoid big agencies. Thats my 5c. Cheers.

Agency work is riddled in BS, corporate work is riddled in BS without the creativity, and freelance is amazing when the money is coming in. Having worked in all these environments, the only one to make me remotely happy is a funded startup where I have a vested interest in their success and believe in the product.

It may have been better to clarify my position first; I'm currently a student preparing my portfolio for graduation.

As far as experience, I've interned in two smaller studios (1-5 heads) with great success. An environment such as that would be my first choice, but I've yet to really tread water in a larger agency, thus have no real basis for comparison. An in-house corporate position seems stifling. All my freelance experience has been for friends / local music related work (thus not very profitable). I'd love to pursue freelance, but the idea of chasing down clients / managing a business seems a little daunting right out of school.

If anything, I'd love to hear some success stories (as well as the horror stories) hah.

I think it's very hard to freelance right out of school. I few people that graduated from university at the same time as me tried and they found it difficult. That's not to say it's impossible, just very hard work.

Personally I would recommend working for a small agency at first. You'll get to grips with how everything works and build up your portfolio. I've been at a 10 person agency for about three years and the variety of work is really great. I've polished my skills in all areas of design and would feel far more comfortable with managing work on a freelance basis now.

I graduated in June with a two year degree, was hired at a pretty classy design firm, didn't like it, left after two months and have been freelancing ever since. It's scary at times. but I have a lot of work already, maybe too much! Questions come up a lot, but I made great friends with my instructors and they are always there to answer my questions. I like to set my own hours as much as possible. I can't imagine working in a large firm again.

I agree with everyone that says personal preference is the ultimate key in determining which route to go.

I have a unique case in that I work a 40 hour work-week as a prepress technician for a wholesale printing company. In my free time I freelance design to fill that void left by doing just prepress work. I carry about 5-10 individual retainer clients (1 is pro bono) yearly and then also have various other clients throughout the year. If I ever were to leave the prepress world I would build my individual freelance clients to compensate my salary.

Wanted to give you an idea of my personal experience and the route I have taken. This works for me, does it work for everyone? Probably not.

Ultimately, finding that balance is a challenge but once it is there - it feels so right

I interned at a smaller agency and loved it! Everyone their had kids and it was way more chill compared to some larger agencies I've worked with. Larger agencies have bigger clients, bigger deadlines, and bigger responsibilities sometimes. It's all a matter of preference. I think I prefer the smaller agency atmosphere but I'm less productive in that environment compared to a larger agency.

It really depends on whether you're looking for more of a stable paycheck or for complete artistic control. That said, if you're designing part-time then freelance is the way to go, but just remember to value your work correctly.